Commercial banks In the organized sector of money market, commercial banks and cooperative banks have been in existence

for the past several decades. -They run on commercial lines. -Cater to short term needs of industry, trade, commerce and agriculture, unlike devt banks which focus on long term needs.

-These days they are looking even long term needs.

-With LPG ,there is rapid progress in banking services.

-Banks are now free to quote their own interest rates on loans/advances and term deposits.
-commercial banks operating in India are categorized in to public, private sectors and Indian and foreign banks depending upon the ownership, management and control. They may be categorized also as scheduled or non scheduled, licensed or non licensed

Public sector banks

-consists of 19 nationalized banks ,SBI and its 7 associates.

-Till 1955,ony private banks were there.

-The 3 phases of nationalization, the first was in July 1955,Govt nationalized Imperial bank of India to create SBI. -In 1959, 8 state banks of erstwhile princely states were also nationalized. -But now only 7 of them are in existence, since state bank of Bikaner and jaipur were merged.

On July 19,1969,(First phase of nationalization) 14 banks were nationalized. On April 15,1980 six more private banks were nationalized. This led to the dominance of public sector, as 90% was brought in to the public sector. Public sector banks are for providing adequate credit for agri and rural sector, small industries, exports and a new class of entrepreneurs. When faced with stiff competition from private and foreign banks , the public sector banks reinvented themselves.

Private sector banks

Before 1969,private people were the shots in commercial banking. Tatas owned the central bank of India. Birlas-United commercial bank (UCB) and soon. Following narasimham reforms(1991),RBI issued guidelines for setting up of new private sector banks in India in Jan 1993. At present there are 21 old private sector banks and 9 new private sector banks.

Formation: Should be listed as public limited company in the companies act f1956.
-It will be governed by the provisions of RBI Act and Banking regulation Act. -The decision regarding licensing and inclusion under 2nd schedule of the RBI shall be final. Capital: min paid up capital Rs100 crore with promoters contribution 25%. If paid up capital is more than Rs100 crores ,then promoters contribution can be 20%. -Shares of the bank should be listed on the stock exchange.

Operations: As specified by RBI and Priority sector lending. For at least 3 years after its establishment they will not be allowed to set up a subsidiary or mutual fund. Opening branches: As per existing policy they can set up branches any where without the approval of RBI, If RBI directs they might be required to open branches even in rural areas.

Foreign banks
-Till 1950s, they were called exchange banks -They finance foreign trade. -They do have branches in important parts of the world. -They are foreign in origin and have their head office located in their parent country. -Many foreign banks opened their offices, and expanded branches after the opening of Indian economy in 1990s

Regional rural banks

-These were jointly set up by GOI, the state govt and sponsor commercial bank. -19 RRBs were set up by GOI under the RRB Act 1976 with the purpose of providing credit and other facilities to the small and marginal farmers ,agricultural labourers, artisans and small entrepreneurs in rural areas.

The then existing cooperative banks and credit agencies were unable to fulfill the requirements of rural poor

At present 196 RRBs in India,29 of which have a negative net worth of about 1800 crores.
They have a network of 14,519 branches with an average credit deposit ratio of less than 60 percent.

RRBs are operating across 518 districts in 26 states.

Cooperative banks
These are engaged in financing rural and agricultural development The other institutions in this set include the RBI,NABARD, commercial banks and regional rural banks. Carried on no profit and no loss basis. Originated with the enactment of cooperative credit societies act of 1904.